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Dublin office market slumped in Q4 last year

A report on Dublin’s office market has said that it may take until 2027 for the market to return to normal, partly due to changes triggered by remote working.

The Q4 2023 Dublin Office Market Report from BNP Paribas Real Estate (BNPPRE) shows that the take-up of office space in the capital in the final three months of last year – excluding the pandemic – was the lowest in a decade.

The figure of 28,487 square metres was also 70% below the long-term average for this time of the year, according to John McCartney (director and head of research, BNPPRE).

“The global economy has become less supportive of business-space demand. Compounding this, sectoral issues in the technology industry, and the structural challenge of remote working, have subtracted further from demand,” he said.

Space per job

The report shows that the technology sector accounted for more than half of office take-up between 2019 and 2021, but that this slipped to 21.4% in 2023. Only 26,000 square metres was leased to technology firms in 2023 – a 54% decline on 2022.

McCartney calculates that the amount of office space needed for each extra job has dropped by two-thirds to 3.2 square metres since 2019, due mainly to the trend towards hybrid working in the technology sector.

“Inescapably, this implies a longer pathway to recovery for the market once peak vacancy has been reached,” he states.

Delays

McCartney expects 2024 office supply to be greater than anticipated, as the completion of some large schemes due last year has been delayed into this year.

BNPPRE is projecting that vacancy in Dublin offices will peak at around 16.6% in 2025.

“With the natural vacancy rate – the tipping point between positive and negative rental growth – being around 11% in Dublin, this suggests peak over-supply of around 250,000 square metres,” McCartney calculates.

He projects that it will be 2027 before the market returns to balance, but adds that this could happen earlier if the labour market outperforms, or if working patterns change.